India to raise foreign investment limit in $60 bln insurance sector

MUMBAI, July 10 (Reuters) - India's new government plans to
nearly double the proportion of foreign investment allowed in
the $60 billion insurance business to 49 percent, a potential
lifeline for a sector starved of capital and squeezed by
regulations.

The proposal, which requires the approval of both houses of
parliament, would bring foreign investment worth up to $2
billion into the sector within a year of its implementation,
industry officials estimated on Thursday.

Finance Minister Arun Jaitley said in his maiden budget
speech that the "composite cap" in the insurance sector should
be increased to 49 per cent from the current level of 26 per
cent, with full Indian management and control.

"The insurance sector is investment starved. Several
segments of the insurance sector need an expansion," he said.

While industry executives sought clarity on whether the
composite cap meant foreigners would be allowed to own up to 49
percent through foreign direct investment and foreign portfolio
investment, they welcomed the long-pending move.

"It will attract more investors. There are some strategic
investors who are very clear about owning 49 percent at least,"
said Amitabh Chaudhry, CEO of HDFC Life, a joint venture between
Indian mortgage lender Housing Development Finance Corp Ltd
and Britain's Standard Life.

"The fact that the government within six weeks of coming to
power has made it clear that that's what they intend to do is a
good sign," he said, adding Standard Life will look at raising
its stake from 26 percent in the joint venture.